- Record Earnings and EPS: TD Bank Group reported $4.2 billion in earnings with EPS of $2.44, achieving an ROE of 4.2% (year-over-year increase of 100 bps).
- Positive Operating Leverage: Delivered three consecutive quarters of positive operating leverage, with year-over-year expense growth moderating to 7%.
- U.S. Banking Momentum: U.S. segment saw 22% year-over-year earnings growth, 7% PTPP increase, and a 330 bps ROCE expansion to 14.7%.
- Restructuring Costs and Savings: Incurred $200M pretax restructuring charges but expects $775M annual savings, targeting $2–2.5B in medium-term cost reductions via AI and automation.
- Wholesale Banking Strength: Generated record revenue and earnings, with 5% expense growth due to tech investments and 43 bps total PCLs within guided ranges.
Segment Performance
The Canadian Personal and Commercial Banking segment delivered record revenue, PTPP, earnings, deposit, and loan volumes. In the U.S., the bank saw continued momentum across its core business lines, with mid-market lending balances up 4% year-over-year. Wealth Management and Insurance also delivered record earnings and assets, driven by market share gains and strong pipeline growth.
Expense Management and Efficiency
The bank continued to moderate its expense growth, with a 7% year-over-year increase, driven by variable compensation, foreign exchange, and the impact of the U.S. strategic card portfolio. The bank is targeting $2 billion to $2.5 billion in annualized cost savings over the medium term, with AI expected to play a key role in driving these savings.
Capital Position and Valuation
The bank's common equity Tier 1 ratio ended the quarter at 14.5%, down 15 basis points sequentially. The bank remains committed to consistently returning excess capital to its shareholders. With a P/TBV ratio of 1.8, the bank's valuation appears reasonable. The dividend yield of 3.13% is also attractive, making the stock a compelling investment opportunity for income investors.
Outlook and Guidance
The bank is confident in its ability to deliver for its shareholders, with a target ROE of 16% by the end of 2027. The bank is also targeting a 40% efficiency ratio, with AI expected to drive further improvements in efficiency and ROE. Analysts estimate revenue growth of 4.1% next year, indicating a stable outlook for the bank's top-line performance.